10 Years After the Crisis.

The financial crisis and the massive federal response reshaped the world we live in. Though the economy is in one of its longest expansions and stock indexes have hit new highs, many people across the political spectrum complain that the recovery is uneven and the markets' gains aren't fairly distributed. The Wall Street Journal takes a look at some of the most eventful aspects of the response and how we got to where we are today.

1.

What's Changed

Good Times Are Back in the Market

The government pumped trillions of dollars into the economy to stabilize the banking system. Bank stocks lagged behind the market but got a boost after November 2016, when Donald Trump was elected president and promised to tear up crisis-era regulations.

Performance since January 2008

Source: WSJ Market Data Group

Wall Street Pay Has Rebounded

Average bonuses and salaries on Wall Street have climbed back from their postcrisis lows. But pay isn’t as lavish at the top: CEOs of big banks earn less than they did around 2007–08.

Average securities industry salaries in New York City, adjusted for inflation

Source: New York State Office of the Comptroller

The Recovery Has Been Uneven

Employment has risen, but about a fifth of U.S. jobs are in occupations where the median income is below the federal poverty line. And median household income is barely above its 2008 level, adjusting for inflation.

Inequality Has Grown

People at the bottom of the pay scale lost their jobs during the crisis. The government’s response to the crisis helped inflate the value of assets like stocks and real estate, which are more often owned by the wealthy.

Distribution of wealth by wealth percentile

2007

Top 1 percent

33.7%

Next 9 percent

37.7%

Bottom 90 percent

28.6%

2016

Top 1 percent

38.7%

Next 9 percent

38.5%

Bottom 90 percent

22.8%

Source: Federal Reserve Survey of Consumer Finances

For the Bailouts, Many Unhappy Returns

The financial crisis cost the U.S. economy some $6 trillion to $14 trillion in lost output, and ended only after the government promised aid worth an estimated $12.6 trillion. Yet many were dissatisfied with aspects of the response, ranging from the price tag to the perceived choice of beneficiaries.

The Rising Costs of Doing Business

The six largest banks have paid at least $110 billion in penalties related to the crisis.

The Federal Reserve increased its ranks of bank field examiners by 39% since 2008 to 1,836 as of 2017.

Kareem Serageldin, a former Credit Suisse banker, is the only top Wall Street executive to go to jail related to the crisis.

2.

What's Mostly the Same

The Biggest Banks Are Still Big

Analysts say the financial crisis highlighted the risk of concentration. But 10 years later the trend of larger firms is still intact.

“This is not an industry that has examined itself and remade itself in the wake of the crisis.”

Phil Angelides, who chaired the U.S. government’s official inquiry into the causes of the financial crisis, told The Wall Street Journal in January.

The Financial Sector: Same As It Ever Was

The financial sector is again becoming a bigger piece of the economy. That could translate to future risks for borrowers and consumers in another crisis.

Finance and insurance industry as a percentage of GDP

Source: U.S. Bureau of Economic Analysis

Revolving Door Still Spins

Regulations are tougher, but the regulators enforcing them often come from the industries they oversee.

Mary Jo White bookended her chairmanship at the SEC as a lawyer defending Wall Street executives and corporations.

...and Spins and Spins

Jay Clayton

then:Partner, Sullivan & Crowell

now:Chairman, SEC

Brett Redfearn

then:JP Morgan

now:Director of Trading and Markets, SEC

Keith Noreika

then:Simpson Thatcher

then:Acting Comptroller of the Currency

now:Simpson Thacher

Joseph Otting

then:CIT Bank, U.S. Bancorp, and other banks

now:Comptroller of the Currency

Steve Mnuchin

then:Goldman Sachs

then:OneWest Bank

now:Treasury Secretary

Gary Cohn

then:Chief Operating Officer, Goldman Sachs

then:Director, National Economic Council

Shahira Knight

then:Fidelity Investments

now:National Economic Council

Dina Powell

then:Goldman Sachs

then:Deputy National Security Advisor

now:Goldman Sachs

DJ Gribbin

then:Managing Director, Macquarie Capital

now:Special Assistant to the President for Infrastructure Policy

Geoffrey Berman

then:Shareholder, Greenberg Traurig

now:Interim U.S. Attorney, Southern District of New York

Robert Khuzami

then:Lawyer, Deutsche Bank

then:Enforcement Director, SEC

then:Partner, Kirkland & Ellis

now:Deputy U.S. Attorney, Southern District of New York

Randal Quarles

then:Cynosure Group, The Carlyle Group

now:Vice Chairman for Supervision, U.S. Federal Reserve

Credit-Rating Firms Still Have Conflicts

The big three credit-rating firms—S&P, Moody's and Fitch—came under scrutiny for assigning favorable ratings to risky debt. Today, these firms still dominate the market and issuers still pay them for their ratings.

94%
of the credit-rating industry's revenue was earned by three firms.

Note: As of 2016Source: Securities and Exchange Commission

U.S. Housing Policy Is Frozen in Time

When Fannie Mae and Freddie Mac were bailed out in 2008, lawmakers promised a reset of U.S. housing finance. But 10 years later, next to nothing has changed.

Government-backed firms* make up
96%
of mortgage security issuance

* Fannie Mae, Ginnie Mae and Freddie MacSource: Urban Institute

3.

Areas to Watch

“People aren’t going to be that stupid again. So they find another way to be stupid…I think there’s going to be other crises.”

Richard Bookstaber, former risk manager at Morgan Stanley and author

Bitcoin, a New Mania

Cryptocurrencies, like bitcoin, have exploded onto the scene, in part reflecting advances in technology as well as splintering trust in the financial system. Regulators are probing a number of the players involved in the market, and analysts warn that investments in these currencies could prove worthless.

Total market value of cryptocurrencies

Source: CoinMarketCap

Trust in the Financial System: Reality Bytes

At same time, companies have more personal information than ever—some of the largest losses of data to hacks happened in recent years.

Equifax lost 147.9 million Americans’ data in a 2017 breach. We still don’t know who did it.

Source: the company

Bracing for a Student-Loan Problem

Some worry student debt, rising for years, could figure in the next credit downturn.

Consumer credit outstanding

Source: Federal Reserve Bank of New York

Indexes: Out of Control?

The rise of exchange-traded funds has made indexing a household word. But the number of indexes world-wide has taken off and now dwarfs the number of stocks, raising questions about the risks investors are taking on, knowingly and otherwise.

There are more than 3 million equity indexes world-wide, compared to about 52,000 listed companies.

Your New Landlord: Private Equity

America’s mortgage crisis created a glut of foreclosed homes for sale. Big investors like the Blackstone Group swooped in to buy and rent them out, creating a new class of American renters.

Consumer Debt Is Creeping Back Up

Personal debt has fallen, but it’s starting to edge higher again.

Household debt service payments as a percentage of disposable personal income

Source: Federal Reserve

...and So Is Complexity

A decade after risks associated with financial engineering nearly brought the economy to its knees, sales of similar products are ticking higher. But Wall Street hasn’t forgotten what happened last time, and so for the moment few analysts are raising alarms.

On the Regulatory Front, Lots of Uncertainty

Republicans have promised a rollback of the 2010 Dodd-Frank financial overhaul, which President Donald Trump calls a "disaster." But Democrats are largely opposed, and bankers say it's not so simple. Any overhaul must focus on rules "that don't work well or are unnecessary," says JPMorgan Chase CEO James Dimon

The Next Time May Be Different

A lasting legacy of the 2008 meltdown was the sharp rise in U.S. debt -- incurred to backstop the financial system as investors fled. While officials and investors largely agree that taking on this debt was the right course, authorities will have much less leeway to act aggressively the next time around.

U.S. public debt has nearly tripled, and the Fed has less room to cut interest rates.

Notes

Low-wage jobs are defined as jobs in occupations with median annual pay below the 100% poverty threshold for a family of four, which was $24,300 as of 2016. Cost of crisis estimate is measured in 2012 dollars.